Vietnam Business Law Blog

Under the Investment Law, an investment project means “…a
collection of proposals for the expenditure of medium and long-term capital in
order to carry out an investment activity in a specific geographical area and
for a specified duration …”

There are various uncertainties from the definition of an
“investment project”:

By using the word “proposal”, the law seems to
suggest that an investment project is a plan not a physical thing. However, the
definition does not make clear to whom and by whom the proposal should be made
and how the proposal will be implemented or adjusted.

When the law refers to “transfer of an
investment project” then it is not clear whether this means the transfer of the
proposal or transfer of the underlying assets of such projects or transfer of
the capital in the project company.

It is not clear if a reference to “project
location” at law is a reference to the geographical
area in the definition of investment project or a reference to the head-quarter
of the project company.

It is
not clear if a reference to “foreign-invested project” a reference to an
investment project of which the project company is owned by a foreign investor
or to an investment project which is financed by foreign capital including
funds from a foreign lenders.

The term “capital” could broadly include loan
capital or equity capital. However, if the term capital includes “loan capital”
then this would require all loan transactions to be subject to investment
procedures under Vietnamese law.

There is no clear distinction between the
implementation of an investment project and the activity of the project company.
This often results in action by a project company to be subject to both
provisions of the Enterprise Law regulating the activities of a company and the
provisions of the Investment Law regulating the implementation of an investment
project.

In an M&A transaction when an investor acquires
shares in a project company from an existing investor then it is not clear
whether the share purchase activity by the purchasing investor or the
activities of the project company is considered an investment project.

In short, the concept of
investment project under Vietnamese law is far from clear. This results in
unclear and overlapping procedures between the Investment Law and other laws. It
would be better and clearer for potential investors if this concept is replaced
with a more specific definition (e.g. concession or development rights).